Lufthansa company and many of its rivals managed to make a vertical start in the spring thanks to favourable framework conditions: a high demand for air travel, which had accumulated during the coronavirus pandemic, met with limited capacities on the airlines. The seating capacity offered was 88% of the level in 2019. The company, however, wants to fly very high with its offer: in 2024, it is expected to be around 95%.
Less Delay and higher Ticket Prices
The German airline had reduced its flight schedule earlier this year to avoid a similar chaos in airport operations that customers suffered from last year. Not only at the airports but also at Lufthansa itself, there was still too little staff on board last year.
This year, 9,000 new employees have already been hired, the Lufthansa company says. The timeliness was improved in the first half of the year, so that only 30% of flights were delayed. “Thanks to the great efforts of our employees, we were able to avoid conditions like last summer and offer our customers more stable air traffic again,” said CEO Spohr.
The record profit is also due to the increase in ticket prices: in the second quarter, Lufthansa increased its turnover by 17% to just under EUR 9.4 billion in the year-on-year comparison. Inflation has also slowed the passenger boom far less than industry experts had feared, the German newspaper Handelsblatt quoted the German Travel Association as saying. The group noticed a positive trend, especially among tourists. Their number has almost reached the level of 2019.
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Constraints as a Profit Factor
Despite the good figures, the shares of Europe’s highest-turnover company lost 6%. “Much of what has driven the profit up is a one-off effect,” aviation adviser Gerald Wissel told Handelsblatt. The effect is similar to that from which container sailing had already benefited. In shipping, in particular, port shutdowns due to pandemics had resulted in capacity constraints, which subsequently increased the profits of the shipping companies enormously.
The two largest European competitors of Lufthansa, IAG, the parent company of British Airways, and Air France-KLM, are equally lagging behind in capacity-building. They both want to offer a 95% quota of seating capacity compared to 2019. In the end, they also benefit from the constraints in the sky. IAG, which also includes the Spanish airlines Iberia and Vueling as well as the Irish Aer Lingus, reported a business profit of EUR 1.25 billion for the second quarter.
Increase in Fuel Price
In particular, the Lufthansa Technology division, which is responsible for the maintenance of many airlines, proved to be the driver of the profit. It contributed EUR 307 million to the operating profit. Here, too, it is shortages that keep the result. Because aircraft parts are also difficult to obtain at the moment, as industry expert Gerald Wissel reports, “the technical support Lufthansa Technik is still likely to have a rich stock of spare parts, which are now traded expensively on the market.”
The situation with regard to the price of oil is of particular concern. “Even though the geopolitical situation remains challenging, our accounting outlook is positive—not only for a very good result this year but also beyond,” said Lufthansa Chief Executive Officer Spohr. Still, this year, the fuel price for Lufthansa aircraft was half a billion euros higher than estimated three months ago.
